On Jun 19, shares of
MGIC Investment Corp.
) rallied up to touch a 52-week high of $9.48 per share. The
impetus in the stock price movement was driven by a slew of
positive news from the company, the most recent ones being the
appointment of experienced executives to expand overall business
and strong business statistics reported for the month of May.
Year to date, shares have added 11.2% to its price compared to 7.0%
gain registered by the S&P 500. MGIC was battered by the
subprime mortgage crisis in 2008. After having suffered
massive losses in the past several quarters, finally the company
started experiencing profits second-quarter 2013 onward, led by the
improvement in the housing market, lower delinquencies and a pickup
in mortgage insurance demand.
MGIC had successfully navigated through the financial crisis and
its recent results reflect improving financial performance,
steadily declining new delinquencies, and stronger regulatory
capital profile, mainly as a result of capital raises and
Management at MGIC is encouraged by the recovering demand for home
purchases. It anticipates benefits from this market opportunity as
the majority of purchases that need a mortgage do not require a 20%
MGIC is regaining market share from the Federal Housing Authority
(FHA). However, the pace of recovery has been slower than expected
given the differences in underwriting guidelines, loan level price
adjustments by the GSEs and the secondary market benefits
associated with government-insured loans versus loans insured by
the private sector. Other private mortgage insurers like
Radian Group Inc.
Genworth Financial Inc.
) have also benefited from the improving industry trends.
MGIC has a Zacks Rank #2 (Buy). Another stock,
Old Republic International Corp.
) with a Zacks Rank #1 (Strong Buy), is also worth considering.
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